Top Analysts See Change & More Change for Spend Management
What does the future hold for spend management? Change and more change, according to industry analysts Dana Gardner of Interarbor Solutions, R “Ray” Wang of Constellation Research, Duncan Jones of Forrester and Jason Busch of Spend Matters and Azul Partners. The four men spoke on this topic in a panel session at Coupa Inspire earlier this year.
As digital disruption continues apace, speeding up everything and changing expectations for how technology is delivered and consumed, there will be a greater emphasis on buyer-supplier partnerships, cross-functional partnership within companies, and also on human-machine partnerships as data becomes more accessible than ever.
And, there will be less focus on product and process and more on value. “What is happening overall is people don't sell products anymore,” said Wang. “You actually have to sell an outcome or a brand promise, depending on what you do.”
Here’s what our analysts see in their crystal balls:
1. Cycle Times Will Be Even More Compressed
Busch recalled doing supply chain planning early in his career, when weeks were spent gathering information and commodity prices were projected quarters in advance.
Today, in contrast we can call up any number of services more or less on demand, and the ability to do that will only increase. As an example of where we’re heading with on-demand, Busch cited a joint venture between UPS and a 3D printing company that is actually producing and shipping plastic injection molded parts overnight. Soon it will be possible to order many items this way, eliminating the potential for incorrect estimates of longer term planning.
2. Services Procurement Will Be Democratized
If you needed professional services or specialized resources, in the past you would go to your HR department or a staffing firm and they would find it for you. Now, digital marketplaces supply talent on demand. Services procurement can be done by anyone.
3. Fee-Based Networks Will Have to Earn Their Keep
Fee-based supplier networks, if they are going to continue to exist, will have to find new ways to provide value. “I'm not quite sure what the difference is between a procurement network and the Internet,” said Jones “The value has to come from something more than just connecting.”
“I think the challenge is charging suppliers for something very basic, such as sending an invoice, when it could be done elsewhere,” said Busch. “The question is, ‘How can we generate new value for suppliers through networks?’ I see this concept of networks evolving because there are many different types of supply networks. The key is there has to be value there.”
4. The RFP Process Will Morph
According to Busch, one the most popular series last year on spendmatters.com was on rethinking the RFP process, indicating this is an idea whose time has come. Why? Digital technology has made much of the traditional process redundant, while expanding global markets and new ways of thinking have laid bare its limitations.
Today, buyers routinely collect data and specifications, and compare costs on the internet. “You can almost fill in your own RFP,” Gardner said.
With the internet’s increased reach and transparency, the days of finding a supplier or capability, or negotiating some deal that no one else in your industry can get are over. That makes partnering with suppliers to innovate even more important. But, in trying to hold everyone to the same set of hard and fast specifications, you may miss out on innovation that’s happening in the market.
“People are rethinking how they approach problems using a methodology called design thinking,” said Wang. “Part of design thinking is asking questions to discover solutions you’ve never thought about.”
Busch recommended using a more open-ended RFI or RFP as the first step. Buyers should also look beyond the vendor to their ecosystem of consulting and/or technology partners, who can bring additional creative capabilities, he said.
5. The Definition of Compliance Will Change
It’s always been a challenge to get people to buy on contract, but Jones challenged people to rethink current ideas about rogue buying and policy compliance.
People aren’t looking to break the rules. They’re just looking to do their jobs in the most efficient way possible. “Digital disruption means using technology to help people do what they're supposed to be doing,” he said. It must help them do that and still spend on contract, he said.
With technology automating contract compliance in the background, companies should look at compliance in the broader sense of what their customers care about, which is increasingly related to corporate social responsibility and brand values.
6. The Cloud is Needed for Agility
Legacy architectures, existing logic, and old patterns of data acquisition aren't going to deliver the agility needed to satisfy the higher and higher expectations from users. Organizations will have to shift to the cloud.
“Cloud is really about consuming a continuous stream of information,” said Wang. “You're not waiting for someone to do an upgrade. You're not waiting for IT team to do maintenance. You're not waiting for the new data center to work or test. You're not shutting down the system. You're just getting the next update as quickly as the vendors are working on it.”
“Vendor choices are going to be super important as you make these transitions we've been discussing,” said Gardner. “You have to work toward a partnership and not a vendor relationship.”
7. Procurement and IT Will Become BFFs
Procurement/IT partnership is going to be very important to be successful in the long-term, said Wang. “Technology lifecycles are shorter and shorter. We’re almost at a point of continuous development. Businesses are going to keep changing and we've got to keep up. The procurement/IT conversation and collaboration is really important.”
That conversation and collaboration must stay focused on business outcomes, said Busch. “Don't think suites. Think outcomes. What are you trying to achieve? Align with your goals as a procurement organization with the business,” he advised.
8. Data Will Be Big, But Don’t Call it Big Data
Procurement has always had lots of data, but there were many constraints on accessing and using it. With the cost of storage plummeting and the plethora of data analysis tools available now, organizations need to be thinking about what kind of analysis they can do that might lead to business benefits.
“Don't think of it as big data,” said Gardner. “Think of it as non-constrained data.”
Tackling operational inefficiencies is the next frontier of this “unconstrained data” movement.
Combining your internal data with data from cloud providers and other outside sources is the name of the game.
“So much of traditional spend analysis has been ‘spent analysis,’” Busch said. “We've got to think across all the insights that we have internally but also externally. That requires different data sets, but it also requires a different mindset.”
The New Business Imperative
As digital disruption ripples across the global economy, it’s more important than ever to get spend management right. “There are a huge number of companies being destroyed by this process,” Wang said, citing the fact that 52% of the Fortune 500 have changed since 2000.
“What people don't realize is the spend management piece is critical. It's at the core of almost every organization's operations. If you can't get that piece right, if you can't be strategic and if you don't have the technology to support your business processes, you're not going to succeed.”